Galapagos - Earnings Call - Q3 2018

Transcript

Speaker 0

Welcome to the Galapagos webcast. At this point, I would like to hand the call over to Elizabeth Goodwin. Please go ahead, ma'am.

Speaker 1

Thank you. Welcome all to the audio webcast of Galapagos' Q3 twenty eighteen results and annual R and D update. I'm Elizabeth Goodwin, Investor Relations, and I'll be hosting today's event. This recorded webcast is accessible via the Galapagos website homepage and will be available for replay later on today. Note that we will be posting the file copies of our webcast slides to the website as well later today.

So that your questions can be included, we request that you call in to the telephone numb number given in last night's press release, (322) 404-0659, and the code is 2357358. Moving on to the disclaimer slide. I would like to remind everyone that we'll be making forward looking statements today during today's webcast. These forward looking statements include remarks concerning future developments of the pipeline and our company and possible changes in the industry and competitive environment. Because these forward looking statements involve risks and uncertainties, Galapagos' actual results may differ materially from the results expressed or implied in these statements.

Let's look at the agenda for today. Today's participants will involve some prepared remarks from our executives. Today, we also welcome Doctor. Philip Meese from the University of Washington, who will be joining us from ACR in Chicago. For Doctor.

Meese, we will open up the floor and phone very briefly for a couple of questions immediately following his talk. But for the others, I request you hold your questions until the Q and A session at the end. So at this point, I'd really like to hand over to Anne von Stolpe, our CEO, who's joining us remotely from The Netherlands today. The folks here in the room can see him. And Anno, please go ahead and start our talk.

Speaker 2

Thank you, Elizabeth. I'd to People New York and the rest of the audience on the webcast. Good morning, good afternoon. Happy to give an intro on what's happening in Galapagos. And of course, we'll start with the announcement we did this morning or late last night regarding the revised agreement with There has been a lot of uncertainty in the market regarding what was going to happen with the cystic fibrosis program, especially after the last press release where we announced that we were reevaluating the collaboration with AbbVie.

And we have come to the conclusion that in this space, AbbVie is the better partner to continue with the program than Galapagos. Is really a new mode of action company focusing on on global targets that we discover with our platform and as we move forward. And clearly, the heated competition that CF space is in, it is more a pharma play than a biotech play. And I think both parties have understood that, and we've come to a very good arrangement, I think, both for AbbVie as well as for ourselves regarding the future of the program. With the consequence that all programs move to AbbVie, they pay us an upfront, 45,000,000.

We get nice milestones along the way if they reach their goal of getting triple into patients and to the market. And we also get very nice royalties ranging in percentage based on the number of candidates in there. All in all, I think we are very pleased with this outcome, and I think it's really the best of the program. We negotiated giving access to 2,737, a candidate, for indications outside CF, and we hope to report on that program in the future to you maybe at a future r and d day. So that has been the CF story for us at least as an active participant.

And, of course, we'll report to you when when we get more milestones or information from from AbbVie regarding the progress of AbbVie's efforts in this year. We wanna thank AbbVie for the collaboration here and wish them all the luck in coming up with a competitor that's triple because that's clearly in the interest of both our companies, but also, of course, in the interest of patients.

Speaker 3

If you go to the

Speaker 2

next slide, let's have a look at the target discovery platform because that is really what Galapagos really is all about, to identify novel mode of actions, new targets that are starting point drug drug discovery and ultimately can lead to drugs like our own detection inhibitor or IL-17C inhibitor that we have come up with. And it's all based on the technology that we developed eighty years ago when we built a collection of viruses, adenoviruses, with small pieces of human DNA in there that when the adenovirus infects a cell, produces a so called siRNA that knocks down one specific gene in the human cell. And by doing that, we can mimic what a drug does in the body, and we can do it very effectively for every important human gene that is druggable for which you develop a drug going forward. That collection is about 20,000 viruses and targeting about 6,000 different genes. And that today, after all these years, is still the basis of our target discovery platform.

It's very versatile. We can basically apply it to any disease for which we can mimic that disease in a cell or a model. Not all diseases are that easy to mimic, but it's quite a serious number. We have been able to come up with a relevant cell model where we use primary human cells, cells directly out of patients, and use those as a basis with the right trigger and the right readout to do the first selection of targets that have a phenotypic effect on the disease and that can be used as a starting point for the further progress. Of course, a long process of target validation before we go into the next phase, And that's actually indicated on the next slide where we show our ambition in the R and D pipeline building where we start with about eight new targets.

That's the goal coming out of the target discovery platform. That then should, of course, with the necessary attrition lead to three preclinical candidates, three proof of concepts, very important staff in the value creation. And ultimately, one phase three starts every two years. That's the ambition that we have laid back laid out a couple of years back. And as you can see in the next slide, then that we have actually realized that very well over the last year and a half where we have come up with a substantial amount of normal target in our three main therapeutic areas, inflammation, metabolic, and fibrosis.

Quite a large number of preclinical candidates leading to proof of concepts in the guava trial, the Rosella trial, and the Falcon trial, and of course, the start of phase three with sixteen ninety in the Isabella trial. So the very steep objectives that we have set with regard to the development of the pipeline so far have been very well developed.

Speaker 3

If we go and look at

Speaker 2

where our focus is now today in research, then clearly it is still for the biggest part in inflammation. And that of course includes Toledo, the program that we'll discuss in detail today at the R and D Day. But also fibrosis and metabolic take up half of the discovery efforts within Galapagos, and then we got some small efforts on hepatitis B and some other smaller efforts that we report on, hopefully, on the future R and D Day. But it's very focused on these three main therapeutic areas, areas that still need a lot of improvement in the way these diseases are treated, and we think there's a great opportunity for Galapagos focusing on new mode of action. If we go to the pipeline in the next slide, you can see that our portfolio is moving forward very nicely.

We came up with 12 preclinical candidates in the last three years, which is an incredible productive research engine. And we obtained that by starting seven to eight new targets every year that go into drug discovery. Of course, projects are stopped all the time. Six to seven projects don't make it to don't reach the candidate states. That is not a problem.

Of course, we would like to keep those numbers as low as possible. But we currently have a portfolio of about 20 to 25 projects, and that's about the the numbers that we would like to keep going forward to continue to feed the pipeline and to become to continue to fill the pipeline of a fully integrated biopharmaceutical company. Slide. If you look at the portfolio today, in the R and D Day, we'll focus on filgotinib and idiopathic pulmonary fibrosis where there's a lot to talk about. We have made major steps forward over the last twelve months.

But also, as you've been following Galapagos, we have had excellent news in atopic dermatitis where IL-17C antibody together with MorphoSys has shown very nice data. We're now in phase two. We've reached an agreement with Novartis to take over this program. And hopefully, will be developed It's an important program for Galapagos.

And also in osteoarthritis, we're excited that we have now started the phase 2b trial. Galapagos is executing executing this this trial trial in in The The US where we're recruiting about 300 patients. Our partner, Servier, is doing that for the rest of the world with about 500 patients. That is going underway very well. And, of course, a long trial with twelve months of of treatment, but we have high hopes that we can see a disease modifying activity of our of our molecule there.

Already said, we have about 20 plus programs in inflammation and fibrosis in discovery, and that includes Toledo, where today we'll be showing you our results so far in animal models, but we're also going to talk about the strategy to maximize this opportunity in as broad inflammation diseases as we can find.

Speaker 3

Go to the next slide.

Speaker 2

Then this was the the part that I was I was presenting. That's also a good reason that I'm still in the in The Netherlands and not flown to to New York. And it's really up to the rest of the team now to present the rest of the data. And we start with the Q3 results that, of course, was in the press release last night, and I'm happy to give the floor to Marc. Marc, good luck.

Speaker 4

Thank you, Ono, and good morning, everyone, here in The U. S. Also good afternoon for those of you that are listening in Europe. I'll take the opportunity of this R and D Day to give you a quick snapshot on the Q3 results for Galapagos that we also reported yesterday. I'll do this rather quickly.

I will have room for questions at the end of the session, but I'll do this rather quickly now so that we have enough time to focus on what really matters in terms of the purpose of today, which is the R and D programs. So maybe first, the delivery in our third quarter, and it has been a remarkable quarter for us, a hallmark quarter is what we called it in our press release because we had the first Phase III results of filgotinib in the FINCH two trial and we'll go into that into a lot more detail later on. And those were very exciting to us obviously as a company. Then also in ankylosing spondylitis, we had the Tortuga trial readouts. We had the first dosing in the ROCCELLA trial in osteoarthritis, our program that we partnered with Servier where we had the full U.

S. Rights. And also in MOR106, we have started a bridging study for the subcu formulation. And as well, in the negotiations with Novartis, we're expanding the development of MOR106 into other indications. And at the corporate level, the closing of the Novartis deal has been July, so it's been part of our third quarter as well.

We had in September a follow on offering, which raised €300,000,000 gross, and that has led us to a cash balance at the end of the quarter of a little over 1,300,000,000.0 Let me get into the cash right away. This is a slide that I've been presenting quite a few times in the meantime, so most of you that have been tracking us know how to read this. Slide on cash on the left, euros 1,100,000,000.0 at the December and €1,340,000,000 at the September 2018. And in between, there is the equity raise that I just mentioned with a net of €286,000,000 but there's also the cash burn. And cash burn, the definition, let me repeat that once more, is really a combination of cash coming in through milestones and upfront payments and at the same time, the cash going out in terms of operating expenses.

So the first nine months has grossed €100,000,000 of cash burn. And we have, as a result also of the CF transaction that we have signed with AbbVie, lowered our expectation for the full year to a range of €140,000,000 to €160,000,000 coming from 180,000,000 to €200,000,000 The €40,000,000 difference therein is exactly the same as the upfront that AbbVie is paying, which is €45,000,000 in dollar terms. So €1,340,000,000 of cash is a healthy balance to invest in our significant and broad portfolio. In terms of key financials, I'll just go through this very quickly. On revenues, we've seen an increase in revenues of about €100,000,000 compared to last year, up to €200,000,000 over the first nine months.

A big chunk in there clearly is the recognition of roughly €50,000,000 from the upfront of the Novartis transaction. But there's also, and that's something that's been recurring every quarter, roughly €10,000,000 per quarter of revenue recognition, which is a result of a change in accounting standards called IFRS 15, and that has helped us in our top line with about €30,000,000 Operating costs at the same time has also gone up by roughly €90,000,000 compared to the same period of last year. As a result, the operating profit differential between the two is €10,000,000 positive. And the cost increase is really driven mostly by two programs filgotinib clearly, which is really in the height of its spending as we speak here in 2018, but also in 2019 with all the trials that we are doing there. But also the Isabella trial, the Phase III program in 1690 is consuming a significant portion of cash and operating costs.

Our net result is negative 44,000,000 which is better than it was last year on one hand because of the improvement in the operating costs, but also because of what I would call a balance sheet translation effect on our currency position. We are keeping part of our €1,300,000,000 in dollars. That's a little over €200,000,000 in dollars. And obviously, dollar fluctuations reported in euros leads to some changes in financial results, which are all paper changes because these are not materialized. But as a result, we are improving our net results compared to last year by €40,000,000 So there, I'd like to already stop with the Q3 results again so that we can spend as much time as we can on the other parts of our Capital Markets Day, filgotinib, the early programs and 1690.

Speaker 1

Thank you, Bart. And at this point, we are going to toggle back to bring in doctor Philip Meiss from the University of Washington in Seattle. Doctor Meiss, are you on the line?

Speaker 5

I am. Can you hear me?

Speaker 1

Yes. We can. We can hear you, and we are looking. There he is. Welcome, Doctor Meese.

Thank you very much for taking the time to join us there from Chicago for your flight back to Seattle. I invite you to go ahead and tell us more about the results you presented.

Speaker 5

Okay. Good morning to you in New York, and good afternoon to those calling in from Europe. My name is Philip Meese. I'm a rheumatologist based in Seattle, WA. I direct rheumatology research at the Swedish Providence Health Systems and a clinical professor at the University of Washington.

If could go to the next slide, please. Let me just frame the presentation of the filgotinib data on psoriatic arthritis that occurred this week at the ACR meeting. The first comment to make is that the abstract was chosen as a plenary presentation. There are on three days of the meeting, there are what are called plenary presentations presentations where there are no other concurrent sessions. There are six abstracts chosen for each day, so 18 abstracts out of the many, many thousand abstracts that are presented at the meeting.

So I put that as that I'm framing that partly because you can see that there was a lot of interest in this particular study at the meeting. I think it reflects also a rising interest in psoriatic arthritis in general in comparison to rheumatoid arthritis and other rheumatic diseases. And it also reflects an interest in the JAK mechanism of immunomodulation. So this first slide that is being shown indicates the basic biology of how JAKs at the receptor level mediate cytokine stimulation of the cell. JAK1, two, and three mediate pro inflammatory cytokine signaling, as well as TYK2.

Filgotinib is a very specific and selective JAK1 inhibitor. And we put in here that JAK2 has some off target signaling as well, including hematologic. And when we get to the safety data, we're going to see some reflection of the fact that filgotinib does not inhibit or work through JAK2, so may have less in the way of hematologic side effect issues. And then JAK3 has an effect on gamma chain, cytokines critical for lymphocyte function. So we'll be, as we get into more and more selective JAK inhibitors, there are going to be two things that we're looking at.

We're going to be looking at, is there any decrement in efficacy as we become more selective? And is there going to be any increase in, excuse me, or decrease in adverse effects as result of greater selectivity. So let's go to the next slide. Here is the molecular model of filgotinib. As mentioned, a highly selective JAK1 inhibitor, 30 fold selective over JAK2.

The half life is shown here, including that of the active metabolite, and its basic mechanism of action. It has demonstrated activity in both Crohn's disease and rheumatoid arthritis. Next slide please. This is the study design, quite simple, phase two study, in which patients with psoriatic arthritis were randomized to receiving either filgotinib two hundred milligrams per day orally, or placebo, roughly sixty five patients per arm. The population coming into the study were predominantly patients who had been treated with a conventional DMARD, such as methotrexate, but there was a small proportion of the population, approximately fifteen percent in both arms, that had been previously exposed to anti TNF therapy.

The way psoriatic arthritis trials are designed typically, is that if the patient is on a background CSD MART such as methotrexate, they're allowed to stay on it, but they're not required to. So you get information both in monotherapy as well as add ons to the combination DMARDs. Next slide please. This is the primary endpoint study. ACR 20 at week sixteen by NRI analysis.

This was achieved by eighty percent of the patients in this study versus thirty three percent in the placebo arm. This is one of the high results that has been seen in recent times in PSA trials, and not only the overall threshold of ACR20 response achieved, but also the effect size, subtracting the placebo arm from the filgotinib arm. So this is a very sturdy result, let me at least put it that way. If we look at the linear time course of the ACR20 response, by one week one can already see separation between the filgotinib treated patients and placebo. The next slide please.

Now we're looking at a higher threshold of response, ACR 50. By the way, I'm assuming everybody knows what the ACR response is, but it's a composite of a number of different factors, including tender, swollen joint count, patient pain, patient global, function score, and acute phase reactant and so forth. So this is at least a 50% improvement, and what many patients find quite satisfactory. And forty seven point seven percent of filgotinib treated patients achieved this, versus fifteen point two percent of the placebo arm. Before I go on to the next, I'm going to just mention a couple of other outcome measures briefly.

There was much more shown in the presentation than I'm showing you here. But I also, at the very end of the talk, will steer you to the Lancet article, in which all of this is published in detail. And one of the exciting aspects of this presentation was that simultaneous presentation at the ACR meeting, the publication of the manuscript of the study was published in The Lancet, along with the ankylosing spondylitis trial with filgotinib, which also showed, was a successful trial in terms of treating that particular condition. And by the way, we know that spondylitis occurs in psoriatic arthritis as well, and so we could use those results there. So just to mention the fact that patient pain improved very quickly, with a major improvement occurring in over half the patients had at least 50% improvement in pain.

And part of the reason I mention this is that there's been some interest recently, based on some of the results with other JAK inhibitors, that there may be a specific and interesting effect on pain response that could be partly independent of treatment of inflammation. So that's just something for you to be aware of, to track as you're looking at the data results. The other important measure to mention is what's called a minimal disease activity measure. This is the composite which more holistically includes other aspects of psoriatic arthritis, including skin response and lymphositis response. That was achieved by a quarter of the patients by week sixteen, so that's nearly complete remission of the disease.

Next slide please. Now we're looking at a function score known as the Health Assessment Questionnaire. As you can see, this improved rapidly and significantly during the course of the trial. On the right hand side you're seeing what's called a minimally important difference, two thirds of the patients achieved this threshold of 0.35 change in the HACS score. Next slide please.

Now we're looking at skin response. This is known as the PASI 75. At week sixteen, forty five percent of the filgotinib treated patients achieved a PASI 75, versus fifteen percent in the placebo arm. Next slide please. Now we're looking at an enthesitis score.

This measures the pain and inflammation that occurs where tendons and ligaments insert into bone. This is an important clinical domain in psoriatic arthritis. And there are several methods of scoring this. This happens to be one called the SPARC, the phositis index, a little higher threshold index of 18 sites that we're measuring. And as you can see, there was a statistically significant mean separation in the SPARC score, and a numeric increase resolution of the spark.

There was another enthesitis measure also used, the Leeds Enthesitis Index, and that showed approximately fifty percent of patients in the filgotinib arm achieving a complete resolution of that particular index, a little slightly lower threshold at week sixteen. So an important additional domain that sometimes takes a little longer or is a little tougher to treat than synovitis or skin disease. Next slide please. Now we turn to adverse events. And overall, the adverse event rate was relatively low, without surprising results compared to the rheumatoid arthritis and Crohn's disease data with this medication.

There was one death in the trial due to a pneumonia. And so that at the bottom of this table, there were no malignancies. There was no deep vein thrombosis. There was no pulmonary embolism. And there were no adjudicated major adverse cardiac events.

Next slide please. I'd like to just mention briefly some of the laboratory study results. And here we're highlighting the hematology parameters. If we look at the top left, the hemoglobin results, what is shown is that there was actually an increase in hemoglobin in the filgotinib treated arm, which likely is a result of treatment of inflammation leading to an improvement of hemoglobin. And there were no grade two, three, or four decrements of hemoglobin noted.

So this is, I think, as much an interesting point about biology as it is about safety. And that is that with more selective JAK1 inhibition, this suggests that there may be less impact on some of the hematologic parameters. And if we turn, look at the lower right hand corner, the lymph lymphocyte, there was no mean change in overall lymphocyte count. There were three episodes of grade two change, no episodes of grade three or four change. Next slide please.

So I would like to conclude and indicate that this was a successful trial with filgotinib in the treatment of patients with psoriatic arthritis. The primary and key secondary endpoints were achieved. And as you can see, there was rapid improvement noted with separation from placebo as early as one week. And overall the profile was as expected, compared to what we've seen with this agent in rheumatoid arthritis and Crohn's disease. Next slide please.

And if you would like to have more details about the results of the study, I encourage you to go to the online publication in the lab set. As mentioned, it appeared, earlier this week on Monday, along, with the results of the ankylosing spondylitis trial, in the same issue of the Lancet. Thank you, and I'd be happy to address any questions.

Speaker 1

Thank you, doctor Meese. This is Elizabeth here at the Yale Club. Operator, could you please instruct callers as to how they can pose a question?

Speaker 0

Certainly. Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please enter for you

Speaker 1

we're waiting for people to dial in, are there any questions here in the room? I see a question here from Sam.

Speaker 6

Sam Eisley. You are a little bit late, at least, in the JAK space. The body of evidence on safety and effectiveness looks pretty good. Would you say that that is because of your JAK1 selectivity, or are there other aspects of your selection of the candidate? If so, what are what are those?

Did you do some structure activity work, or did you just perhaps it does happen. Did you just perhaps get lucky?

Speaker 7

Elizabeth, what what might be best is is some of

Speaker 5

the some aspects of that question are gonna be best handled by internal representatives of Galapagos. A comment I might make, just as an outside physician, is that I'm not I want to caution you that these are phase two results. We did see a very high ACR20 response, which is good. But as you know, sometimes as you move into phase three, results come down to earth a bit more. So it's a little bit tough to take this data and say that there is a signal for necessarily greater efficacy.

I think a key point though has to do with the fact that there may be some differences in safety.

Speaker 1

And is there a question on the line, operator? There

Speaker 0

are no questions at this time, so I'd like to turn the conference back to you, Elizabeth.

Speaker 1

Okay. Are there any other questions here in the room? Okay. Thank you very much, Doctor. Meese.

We hope you have safe travels back to Seattle.

Speaker 0

Thank you. Alright.

Speaker 8

Good morning, everybody. Good morning or good afternoon for those of us joining from other parts of the world. Can you switch to okay, good. Perhaps I can address one element of your question. It will come through also in my presentation, I want to say it here.

I agree with Doctor. Meese that, again, this is a Phase II trial and about six patients each. So we'll have to take those data with the limitations of the size of the study. But if you look at the totality of the program with filgotinib, I think the data are becoming more and more consistent demonstrating the very high level of activity in terms of efficacy with a best in class safety and tolerability profile. And I think this is really borne out as a result of the selectivity and I think this is a core area of focus presentation now.

So happy to take your question afterwards if you want to delve into more details after we open the Q and A session.

Speaker 0

Okay? Alright.

Speaker 8

So talking about fulcatinib, you look at this and you see generally that this is a pipeline and drug. So we're generally here building a franchise with this compound. We have a number of studies that are going on in Phase III in rheumatoid arthritis and inflammatory bowel disease. But in addition, there are large number of data in Phase II trials, both in rheumatic diseases and inflammatory bowel diseases that are coming through. And now we've seen data from psoriatic arthritis, and I'll show you later data from ankylosing spondylitis, but we also have studies that are ongoing in Jigaran syndrome, uveitis, and lupus erythematosus.

So we're very excited about the data coming up and the way this program is shaping up. So looking at this, looking at about our ambition with filgotinib, I think we have I'm counting in my head, previously we have about or actually we have precisely eight double blind placebo controlled trials that are read out with filgotinib from Phase II, Phase III, including some study in Phase II that Gilead has recently run-in combination with their SYK inhibitor. And filgotinib has consistently performed as we've been expecting it based on the in vitro activity and the selectivity for JAK1, specifically very strong activity on efficacy signs and symptoms of various diseases, both dermatologic and also in Crohn's disease, a rapid onset of action which is also sustained, safety profile which up to date we have about more than 2,000 patient year experience and the safety profile is shaping up to be best in class for the JAK inhibitors. So when you look at these two in combination, couple it with the fact that once daily and it has a potential for monotherapy, we think this is going to be a very important medication for many people living with rheumatic diseases and inflammatory bowel diseases.

As a result, it will be also commercially very successful. So where does the story start? It starts here with the high selectivity. You heard Doctor. Meiss highlighting this for the case of JAK2.

These are in house data, but also those were independent independently validated by Professor MacInnis, an independent and very well respected investigator in this space. These are in vitro data that show on the left hand side of the graph of the graph on the left hand side, it shows the selectivity for JAK1 over JAK2. And on the right hand side of the slide is JAK1 versus JAK3. And I think it's very clear that based on these in vitro data, the selectivity for filgotinib is very high compared to other JAKs in development. And then why is that important?

It's important because this will have consequences clinically. In the next couple of slides, show you some clinical data from the earlier studies, but as now we're starting to build up more of our database with large phase in vitro studies reading out, the story is shaping up to support these assertions that we've made based on the in vitro experiment. And I think that's really important. It's going to be a differentiating feature for filgotinib compared to the other JAK inhibitors. So here, again, is a clear testimony of the effect of JAKs on off target activity with JAK two.

So just to set the stage a little bit, chronic inflammatory conditions lead to anemia. And when you treat the underlying condition, people usually recover. They secrete EPO and EPO signals through through JAK two, and you increase your hemoglobin. Drugs that effectively treat inflammation and do not interfere with the JAK2 signaling like filgotinib, like adalimumab as a matter of fact, you do see a very nice increase in hemoglobin as you treat the underlying condition, even in short studies like this that we're showing twelve weeks. Again, to be very clear, those are not from the same studies.

So we're just putting them adjacent to each other, so, you know, use the necessary precautions in interpreting this. But still, we think this matters a lot. You see that very clearly in the case of baricitinib, in the case of ubadafitinib, where you would have a reduction, dose dependent reduction in hemoglobin over time. And here on the next slide is a similar story with platelets. If you recall, if you were watching the advisory committee for baricitinib, this is top of mind for the FDA where they focused a lot on the role of JAK2 actually in platelet levels.

Similar story here, chronic inflammation leads to increase in acute phase reactants, increase in hypercoagulability, increase in platelet levels. And when you treat with the underlying condition with effective drugs, again, that do not interfere with JAK-two, have you a reduction in platelets. Again, we see it with adalimumab, you see it with IL-six inhibitors, and you see it also with filgotinib and actually with TOFA, which does not interfere with JAK-two. However, in the case of baricitinib, you do see an

Speaker 0

increase.

Speaker 8

And in the case of UPA, based on data that have been stated by AbbVie, there are no changes in platelets, whereas one would expect a decrease. Moving on to the JAK3 story. Here you can see very nicely JAK3 affects the NK cells and downstream effect of it are the rate of infections and so on and so forth. And you will see on the left hand panel with filgotinib that we don't see any appreciable changes in NK cells, whereas these changes are quite obvious with TOFA and UPA. So these are our data that we've been showing for some time on a regular basis actually.

Virtually every six months we update a DULAR and ACR. This is the long term extension of our DARWIN III study. And often we update it with updated data that are that the other JAKs are showing. Unfortunately, there's not been any recent update on OPA, but the BERI and TOFA data last week at ACR continue to confirm what they have seen. Looking at filgotinib, again, with more than 2,000 patient year experience, our data continue to differentiate themselves positively.

Again, this is an open label extension trial, so you have to use that judgment in looking at the data, but we're very pleased to see the rates of serious infection, herpes, DVTs and PEs, and death, which are very clear here and trending quite low. In the case of DVT and PE, because I know this is something that is top of mind for a lot of you guys following this space, these represent two events actually in one patient, one DVT and one PE. And there's been, to be very clear, no change since the past year or so that we've been reporting on this. So the FINCH program, which is ongoing, is represented here. You will see, as I will discuss later, the results of the FINCH two.

We've always said that we're very pleased with the fact that we evaluate both one hundred and two hundred milligram equally virtually in the whole program, and that will enable us to make very solid risk benefit assessment for each dose when we look at the data. So these studies are ongoing. As you know, we reported on FINCH two, and I'll go into more details today. FINCH one and three have been fully recruited and should be reporting early next year. In the IBD, the programs are ongoing.

Again, those are robust programs. Both doses are equally evaluated in these programs. Thirteen hundred patients in UC and thirteen hundred Crohn's, and both of these are now officially in phase three. So without further ado, and I apologize, I'm going to go fast, I'm going to also select the data because if we wanted to go through all the data, and you've heard Doctor. Meiss before, he added more than what was shown on the slide, we will end up the whole day talking about filgotinib, which is not a bad thing, but we have other stuff also we want to share with you.

So let me start with, again, being very proud of the fact that we have not one, but two Lancet papers appearing on the same day coincident with with the plenary session on the psoriatic arthritis. So this is our study in in in ankylosing spondylitis. Again, we refer you to this. As you know, the Lancet and the appendix, there are a lot more details that you can go through and and and look at the data if you have further questions. Study design, again, helps to present this after doctor Meese because it's virtually similar in general, simple design, double blind, placebo control.

Duration here is twelve weeks. These are patients with ankylosing spondylitis, about 60 per arm, were randomized to either filgotinib two hundred or placebo. These are patients who could have been on TNF before or are naive. The overwhelming majority actually were naive or about ninety percent people were naive. Or they could have been on monotherapy or on conventional DMARDs, and about forty percent of them were on conventional DMARDs.

Primary endpoint at week twelve was the ankylosing spondylitis disease activity index. This we show here. You see on the left hand side panel at week twelve a robust reduction in the robust improvement in the ASDAS compared to placebo. And on the right hand side, you see also the time course, which again is very consistent. And this is a story you'll see it consistently from the psoriatic arthritis, ankylosing spondylitis, and later rheumatoid arthritis study that I will be discussing.

The results are seen at the first time point we look at, in this case it was two weeks, the results continue to improve and are sustained. Actually in this case, if you can see and you can appreciate from the curve, I don't think we reach a plateau by week twelve. I think it reflects also the more difficult disease that ankylosing spondylitis is. As you know, a number of compounds in this space which have been active in RA or in psoriatic arthritis failed ankylosing spondylitis reflecting probably a different biology, but also a more difficult to treat population. And as a result, a higher unmet medical need.

So we're very excited about the data that we've seen. So this is a look at the ASAS 20. This is the assessment of spondyloarthritis based on the International Society. It's another way of looking at it. You can actually derive the ASAS from this one.

But this one takes out the CRP as part of the scale so that you don't kind of bias it for JAK inhibitors in general. But again, you see a very robust effect with ACR20 reaching seventy six percent after 12 of treatment. And again, you see this continuous increase which doesn't seem like it is plateauing, at least in this study. Looking at the functioning, which is actually very important for patients, this is the BAT for functioning index, and you see very robust changes, improvements that are seen early on in the trial and they're sustained throughout the trial and actually continue to improve. Again, the same story.

I don't have a feeling that we have completely plateaued So there's a hope that with longer trials we'll see even a stronger efficacy. And we look at spinal mobility with BACNE. Again, very robust effects that are observed starting at week four, which is the first time we looked at it, and continuing to improve throughout the trial. When you look at MRI and evaluate specifically inflammation, either in general or on the right hand panel you see for the sacroiliac joint, which is joint that's mostly affected in ankylosing spondylitis.

Again, are very robust effects that we are seeing in terms of efficacy. Moving on to the adverse events. Again, consistent story throughout the day. The rates of adverse events are not going to be any different between placebo and drug. Here, the rates of events over twelve week period are about thirty percent for both.

We've seen the same in ankylosing spondylitis. I think the rates there I mean, in psoriatic arthritis, the rates there were about sixty percent or fifty five percent. But again, there were no difference between drug and placebo. When you look at infections, they're equal. In terms of serious infection, we had one case of pneumonia at the filgotinib group, and that was grade three.

But when we stopped the drug and treat the patient, the patient recovered with with no with no problem. When you look at other important infections such as opportunistic infection, herpes, tuberculosis, there were no such events seen in the trial. And the pneumonia is the one that I mentioned is the same serious treatment emergent emerging adverse event, and and and that's the the same event that's being represented. Malignancies, there were no malignancies seen including lymphoma. There was one case of deep venous thrombosis in the filgotinib two hundred milligram dose.

That was non serious. This was a patient who had a predisposing condition. He was heterozygous for a condition called factor V Leiden mutation. This is a mutation that increases your risk of thrombosis and otherwise is not recognized. These patients obviously often actually realize that they have this condition once they have a thrombotic event that happens.

In this case, actually, this individual found out his diagnosis when his brother had thrombotic event, and then the patient did the testing and turned out to to to have this condition. There were no cases of pulmonary embolism, no cases of major adverse cardiac events, space, and no deaths in this trial. So to conclude, when we discussed these data with a number of experts in the field that were really impressed by the consistent effects that were seen with filgotinib in in in this patient population, not just only on symptoms, but also on multiple domains in terms of physical function, spinal mobility, and also the the joint inflammation as in MRI. So we sense a great level of excitement because of the consistent effect across multiple domains. And when you look at the tolerability, we were quite pleased with the results that we're seeing.

And again, we continue to build on the data that is supporting our position that filgotinib is looking like having a best in class safety and tolerability profile. Let's go to the exciting FINCH two data. These data were released at ACR in a poster, late breaking poster, and the data contains more information that, again, I'm going be able to show today. But we're very excited about this. This is, if you recall, this is in the most difficult to treat population, right?

So we have FINCH one, which is in the methotrexate IR or conventional IR. You have FINCH two which is in biological IR. And then you have FINCH three which is in the early RA population. So these are the most difficult to treat population. Study design, twenty four week double blind placebo controlled trial.

And these guys received placebo for the full twenty four weeks. This is little bit different than some other competitors have done. About 150 patients are randomized one to one to one to either placebo, filgotinib one hundred, or filgotinib two hundred milligram once daily. The primary endpoint was at twelve weeks and was based on ACR 20. This is, again, what the regulatory authorities in The U.

S. Use and that was what's used in the trial. Patients after completing the trial were rolled into an open label extension. And actually that's the case for all the other FINCHs as well. So these are the primary endpoints.

On the left hand side, you'll see a very robust effect that we see at the one hundred milligram with fifty seven point five percent meeting the ACR20 response rate compared to thirty one in placebo, but even a higher number with the ACR20 at sixty six percent. And those are very impressive if you take into consideration this difficult to treat patient population.

Speaker 7

The right hand side you see

Speaker 8

the time course, not only through twelve, but also twenty four weeks for placebo and the two active doses. And you see very nicely, again, a very rapid effect seen at the first time point we look at, which is two weeks, goes up. I think it plateaus around eight weeks, and then it's sustained throughout the trial with a very respectable 5570% ACR20 response rates for filgotinib one hundred and 200, respectively. And here we look at the higher threshold, so to speak, the ACR 50, the ACR 70. So on the left hand side panel, you will see the week twelve.

On the right hand side panel, see the week 24. And you see again very nicely in ACR 50 of about 3243% for one hundred and two hundred at week twelve and thirty five and forty six percent for the one hundred and two hundred at week twenty four. CCR70 continues to improve over twenty four weeks, it's about a third of the patients on two hundred mg reach that threshold compared to eight percent placebo. These data are quite robust. So try to see how does this compare, because we all compare.

We tried to put this and tried to get the data from the similar trials that were done with other JAKs. So let me take a couple of minutes to kind of situate you here. The orange dots or semi dots, as they're showing right now, are the placebo response, the actual placebo response of the trial. The dark green dots will be the active drug. And the numbers in the bar are the difference between drug and placebo.

And so these are the data from week 12. You see our data from FINCH two on the left hand side panel, and then you can see the data from RA Deacon for baricitinib, oral STEP for TOFA and SELECT BEYOND for UPA shown on the right hand side. And if we look at ACR 50, which is a little bit of the higher threshold and often what is clinically looked at by rheumatologists were being told, you see again that story how it plays out here. Again, those are not from the same trials, so it's important for you guys to take that into consideration when you look at the data, but it helped us to figure out where our compound sits in this space. So here we talk about the patient reported outcomes and patient functioning with the health assessment and disability index.

And again, a very strong effect at week 12 here, showing close to 0.5 for both doses compared to only 0.2 for placebo. These data are quite good. That's the American quite as in very good. The English is quite differently. And and and if you do use other other other ways to measure, which is the low disease activity defined as a DAS 25 CRP less or equal to 3.2 or remission on the right hand side panel with DAS 28 CRP less than 2.6, you see the responses with filgotinib one hundred and two hundred that are very robust in both of these cases.

So moving on to the safety and tolerability. Again, the story here is the same. If you look at the first row up top, that these are the rate of AEs. The slide is a bit busy. We tried to break it down with putting bold and regular text.

But if you look at the the top, you see that the rate of AEs are not different between active and placebo. And more importantly, there's no dose dependent increase with filgotinib. I think it's year. We the drug. Drug.

Have have discontinuation, the numbers are quite small and not very different between drug and placebo, two percent versus four percent or three point five percent. When you look at the serious AEs, again, we're not looking at at appreciable differences and and definitely no dose dependent effect in the case of filgotinib. In the case of infection, I think there is a small uptick in the rate of infection. So we have about twenty six percent on placebo and thirty four to thirty six percent on filgotinib. But when you look at seriously the serious infections, that that is not borne out.

The rates are very similar between placebo and drug, and certainly absence of any drug dependent increase in serious infection. There were two cases of herpes zoster. Both of them were mean, four cases, two on each of the active doses of filgotinib that was not on placebo. There were no cases of opportunistic infection, no tuberculosis, and no pneumonia in this trial. Malignancy, including lymphoma, there were none in this trial, and there was no cases of deep venous thrombosis or pulmonary embolism in this trial.

There was one subject randomized to the two hundred milligram of filgotinib who suffered from a retinal vein occlusion. It's a thrombotic event, but it's in a retinal vein. Looking at the major adjudicated cardiac event, MACE, there were two cases. One was on placebo, and one was on the one hundred milligram dose. There were no deaths in the trial.

And again, we always try And and in the next slide, I'm gonna try to compare now the safety, and I'm gonna do that by juxtaposing Select Beyond with OOPA with ours. Let me set it up a little bit because Select Beyond used placebo control for only the first twelve weeks. Then those who were on placebo, half of them got randomized to 15 of OPA and fifteen and thirty of UPA. So for us to be able to add the numbers together and those are derived from the Lancet publication Selection, we essentially added the N of patients who were randomized to OPA15 and 30 from the beginning, plus those who were changed from placebo to active in the second part.

That's how we arrived to the Ns at the bottom. And looking at the slide and looking at serious adverse events as well as adverse events of interest, I'm not sure I need to go through it in detail. Maybe I just show it to you here to demonstrate how the selectivity of our drug is translating into an adverse event that is shaping up to be best in class. Now these are not head to head, so I have to be very careful when you interpret this, but we show these data because we were impressed with the difference that we see between our drugs and others that are in development or on the market. So to conclude, on Pitch two, we see a significant and rapid and sustained improvement in the signs and symptoms in this difficult to treat population.

These are people who have failed more than one DMARC. Actually, many of them failed two or three. We see very robust efficacy at the one hundred milligram, and and when you compare across studies as I've shown you before, you can see that very clearly. But the two hundred milligram even did better than the one hundred milligram, at least numerically in the trial, but that was consistent across the board even when we look at the time course. I haven't shown you these data, but they were in the poster.

When you look at the DCR20 response rate and you compare whether depending on those who received who failed one biologic, two, three or more, the response rate was not different between these patient populations. The adverse event profile are consistent with the Phase II data. And again, based our in vitro activity that we have selectivity for JAK1. As I said, we are very excited about the fact that we don't see evidence of increase in adverse event with dose. So this is, to us, an increase in safety between doses with no increase in efficacy between doses with no increase in safety and tolerability is a differentiating factor and unique factor actually for filgotinib amongst the JAKs that are either approved or are in development.

And I will leave you with this slide to tell you although we told you a lot of news on filgotinib, this is just the beginning. We are going to be having a series of additional data that are going to read out from our Phase II programs, also from our pivotal programs and also news about potential Phase III starts as well as filing strategies and launches in the coming few years. And with that, I'll turn it over to Pete to tell you much more about what's going to happen in the future. Thank you.

Speaker 7

Thank you, Walid, and welcome to all the people in the room here in New York and as well to the people on the line. It's a good reason to stay a bit longer in this talk because I have a couple of scoops for you. So for the first time, I'm going to present on the ART512 the project that we have coming that's going to keep us busy for the coming years. I'll show you the thinking behind, and I'll show you some of the impressive animal model data that really has convinced the whole company in fact that while we're so pleased with the efficacy we see with filgotinib, we need to remain ambition and we need to remain and try to push therapies to the next level of efficacy. I also have a scoop in the IPF right there where I'll highlight two new compounds in the pipeline and I'll show some data on that.

But let's start with the Toledo franchise. It's in fact a Spanish town, that we call it after, this project. Some people ask me where is that name coming from, but it's a very nice town in the center of Spain. And for all of you ever traveling into Europe, if you're out of ideas, that's always a good idea to go. First of all, question, does all these diseases still need next level drugs?

And let me show here, over time, the evolution of how many patients fully can control or almost fully can control the signs and symptoms of psoriasis. You can see about 15 ago in February, it was less than ten percent and with good signs of many companies, we've now pushed this eighty percent. So let's be clear, for this disease, the room for further improvement is extremely limited and that's not what we are after here. We are very pleased with this level of efficacy. We showed other diseases and in green we have RA.

I was impressed and pleased as we are with our Phase III data. If you look from the flip side effect, you take ACR70 as a measure that patients get almost full control of their disease, forty percent is really the max of today. They really see room for improvement beyond the JAKs and other treatments that are currently in development. So really there we believe there is room to remain ambitious and to keep on looking for treatments that pushes the next level of efficacy. Also in IBD in RET, the situation is similar.

Over the past years, levels of efficacy have remarkably improved. We bring much better treatments to the patients than the ones we currently have. We should take the best drugs in development, but still less than fifty percent of the patients get their disease efficiently under control. So we really believe that there is still room for improvement there. And as filgotinib goes from POP to POP in Phase II and we have two studies, we will see more diseases where with filgotinib bring a next level of control, where we are still for some of the patients even those excellent drugs are not good enough.

So being ambitious about next level of efficacy also puts a challenge on the team. And so we really took a couple of steps back and asked ourselves what type of a disease model do we need to design in order to have a chance of finding defects. And so let me take you to an inflamed tissue. In fact, this is a patient with RA. And in fact, the patient suffers from the disease because there is an insult, the immune system acts and the patient is not capable of controlling that action.

The immune activity goes out of control and causes local damage. So all of the red dots here are the cytokines and there is an excess of pro in inflammatory cytokines in the joints. And the cytokines bind receptors and then they will signal through a check and yellow arrow there tells you that the immune cell is on fire. So current drugs, we have different classes, do different things, but fundamentally do the same. They either block the cytokine, they either block the receptor, or they block the JAK.

And the answer what they do is all they dampen the over stimulation of the immune cell. So that's the consequence. If you're now a bit ambitious and you want to find something next, what we really want to have is a kind of treatment where we have less cytokines. We don't want to be the fireman anymore with our treatments. We really would like that we give the tissue the control back over the immune reaction.

We want that tissue capable of reacting to the insult, but at the same moment it's capable of controlling that. That was a kind of a challenge to the team. We said, okay, let's now be honest and we can go for the next cytokine, we can go for the next receptors, the signaling, whatever we can optimize a couple of tissue properties. The effect if we really want to find something novel, need much more complex systems. That's when we designed this co culture system.

So it's a two layer system, where on top we have epithelial cells that mimic GI barrier in the tract. And in the same world but below, we bring in the sensory cells, the dendritic cells. And if we now add to this mixture a third component, namely E. Coli bacteria, we can put the whole system on fire and we can start to study the interplay between the sensory cells and the epithelial layer. And so it's these types, and this is only one, we have many more of those, of co culture systems that allow us to fundamentally go and look for more complex ways of inhibiting, autoimmune diseases.

One of them that we discovered is the Toledo. And on the right you can see a dose response of the compounds. In dark brown, we clearly show that when we applied in the co culture, we have a nice dose response and even when we have bacteria, we can completely protect the GI barrier. On the other hand, we can run the model as well with a single cell, so no dendritic cells available. And at that moment, these compounds don't do anything.

So kind of proof that really with these more complex models, you attain a more complex mechanism of action. Dendritic cells are one type of immune cells. We have studied Toledoes in many more cells. Quite intriguing data and also exciting data we got in the macrophages. What you see here is in green cytokines that drive the reaction.

These are the pro inflammatory cytokines. You see from left to right a nice dose response and we suppress those, which brings you more or less into the same way of working as you have with the JAK. What we did expect and we are very pleased to observe is that for the first time now, we see that we also as well with the same molecule in the same dose response way, we can push up the anti inflammatory cytokines. So we give the system much more control back to make sure it can respond to a challenge that it can control as well. That's what when we saw this data that made us start to dream to wow, if you now can have a double punch system where we bring down the bad ones, we push up the good ones, we might have a good chance of bringing in next level of disease control to the patient.

It all started in the GI tract and we extensively studied different animal models. On the right, this is the DSS model, is the most frequently used model. In fact, the model where you locally irritate and where it's especially the local cells that play a role. And on gray on the baseline, these are the unchallenged animals, you don't see any level of disease. The moment you start to challenge the animals in orange, you see the disease activity moving up.

And so JAK, some of the JAK compounds will score in the system, others for the reason we don't understand, don't do it well. And for us, we have another internal control which systematically scores well and brings down more or less the disease activity to a level we say, if you can reach yet, this is as good as we've seen in this model. For the compounds of this project, for the first time, we've been really and compound after compound seeing a much more and a much better disease control. So the amount of efficacy we bring and we observe with the model is something we've never seen before. And secondly as well, we see it at extreme low dosages.

Compound after compound effect, we see a better disease control and at a very low dosage. So really showing that in this model, these compounds nicely work. A bit more complex model is a T cell transfer model. There the epitope barrier is not challenged and you bring in T cells, activated T cells into the systemic stream of these immunocompromised mice. And from that you will destroy as well the epithelial barrier.

This is a model where, for example, IL-twenty three antibodies score well. Again there in gray, if there is no T cell activation, there is no disease. The moment you transfer those T cells, you get a nice increase of disease activity. And again there, our compounds of this project, they give us much more control over the disease than any other class we studied before. Finally on the right, the MDR-one model, I don't know whether many people know this, in fact it's an intriguing model.

It's a model where we bring in a mutation in a PGP pump and mice will develop over twelve weeks disease. So it's a whole bunch of research I'm going to really understand. Because also in patients, some of the mutations in the PGP may put patients at a higher risk of, developing disease. But what exactly happens there is still not understood. It is the most complete setting of disease.

And also there, we have the same picture. No mutation, no disease. With a mutation, the disease develops spontaneously after twelve weeks. Within abatacept, we can limit activation of T cells and partially suppress this. With the Toledo, almost fully suppress any signs of disease.

So clearly showing that from that complex model to a new way of controlling the disease by doing a double punch, pushing down the inflammatory cytokines, pushing up the anti inflammatory. We really have here a whole class of compounds with a level of activity which is completely novel and exciting to us. To treat the same concept as well, there is no reason why if we are a bit lucky this cannot work in other diseases. These are now the first compound that we tested in the CIA model. So the challenge for the compound is a bit bigger, you dose the compound early, needs to go to the joints, but as well show there a level of disease control.

There as well, we start to see now a nice dose response where with the highest dose we bring almost the disease fully under control. So this is a level of control we can reach with the CHAK, we can reach with the best of the Iraq force. That's really an impressive level of disease control that we as well start to see. So with this target we discovered in a GI model, we are now trying to expand this across a couple of other diseases. So that's the ambition we have with the program.

At the moment, we've done IBD models, RA models, SCIP models, psoriatic arthritis model, all of those disease activities we start to see a very strong control of disease and we plan to take this into lupus, osteoarthritis, OP, fibrosis wherever we can. On the Y axis as well, we've been doing chemistry for two years and have the ambition of bringing a novel scaffold every other year. Because with new scaffolds, we see different selectivities and as well we see compounds that penetrate the different tissues into a different way. So we really want to maximally exploit any of the possibilities of this novel mechanism function. So on there you see the local one.

So we've proven that for the IBD models for ourselves with compounds that are systemically not exposed, we as well can completely control the disease activity. So over the coming years, you might expect from us a couple of compounds entering the pipeline and they'll have numbers and they might be targeted at different diseases, thanks to the chemistry or they might be targeted to colon only if it's a local one. So how far are we with this franchise? So the first compound has completed the preclinical tox, that is a four week IND enabling tox study. We are writing the dossier and we'll submit this over the coming weeks and plan to start the first Phase I early next year.

And then we hope to be in patient second half of next year for the first proof of concept. Quickly behind will come an inhibitor from a different chemical class and the plan there is by mid of next year will be in the clinic as well. And then we're working on different chemistries on the local as well and they will follow soon. Our ambition is to bring three to four, maybe five molecules into the clinic over the coming quarters and then target them towards different diseases and try to prove in various proof of concepts and exploit the opportunities of this novel way of controlling immune diseases. The strategy here is that I'm not going to tell you the target and that's of course on all your mind you would like to know the target.

So but, we're going to keep that hidden until we have our first proof of concepts that report out. And at that moment, we need to going to to to share with you the full scientific view. The plan really is the biggest project in discovery, about 40 chemists working on it, about 30 people that explore the disease models in vitro and in vivo. So really continue for a number of years until we have full bases covered, all bases covered and then can push forward a number of molecules into proof of concept studies and with all the experience we got from filgotinib, which then further to the market. Now so forth for the Toledo franchise.

Let me now bring you to IPF. So I'll handle the earlier compounds in the pipeline and Walid will take over and explain to you how the Phase III program of 1619 is designed. Our science brought us to IPF. Honestly, when I joined the company ten years ago, we did not have an IPF project. Project.

It was the Autotaxin program when we looked for the best indication that took us viral animal models into IPF. And only at that moment honestly I started to realize that IPF really is a terrible disease. Patients not get the diagnosis, in fact, you can't get the worst news. There are a couple of drugs, but we can't stop the disease. Your life expectancy is limited.

Your lung function will decline. And within a couple of years normally as a patient you will die. It's a disease which in terms of size for a biotech is attractive with 200,000 patients worldwide. As a company, we have the ambition here of developing these drugs through Phase three, bring them to the market and also do the marketing ourselves. So IPF really is a disease where we invest heavily because we believe it can make for us a completely integrated company.

On the graph there, see the annual survival rate, five year survival rate, well IPF is worse than most of the cancers there. So that's bad as the diseases. Currently, two drugs are approved. The market is split fifty-fifty. Good news for the patients is that there are drugs available.

Both drugs slow down the decline of lung function, so patients should live longer. Unfortunately, both drugs come with serious side effects and patients don't feel an improvement and twenty five percent of patients on treatment every year will stop due to all of the side effects. So that's really if you look out there, even with two drugs available, one in three patients currently is not on treatment. So one in three of patients also in The US, who are insured while having access to the drugs, does not take these drugs because he doesn't tolerate, he or she does not tolerate due to the side effects. So we are progressing three different compounds for IPF.

So the cause of IPF is poorly understood. It's a kind of a black box disease, but what we know that at a certain moment, a fibrotic process locally takes over and accelerates the process. That's also why there is no golden bullet yet there. Nobody I think understands where you really need to intervene. And so our approach, we try to cover it from a couple of different angles.

So 6019 has started Phase III. So twelve oh five is a GPR84 antagonist, has started Phase II as well as we speak. And then the new one for today is 03/1999. I'm not going to disclose the data, but going to show you as well, some of the preclinical data. I won't disclose the target, but I will show you some of the nice preclinical data and the thinking behind, this module.

Let's start with twelve oh five. For those of you who know us longer, twelve oh five, it's a low number, so it's been long in the pipeline. We did a Phase II a number of years ago in UC that failed. And afterwards, we started looking for a second indication. And that took us a while because you really want to be sure if you go for that second disease that you have solid data.

For twelve oh five, the disease where it showed up in the animal models as quite strong, it has very nice BS. On the left you see the bleomycin model. Bleomycin, I fully agree it's kind of a black model. We don't know what's happening here. The way internally we run it when we select compounds for the clinic is that we really wait as long as we can until the inflammatory phase is over.

We only dose in the second part of the model where the fibrotic processes are taking over. And so in that way, we really want to select molecules that show a strong anti fibrotic activity. And twelve oh five has shown that in a consistent way in this model and as a positive reference we taken in tetanib here. So again here in grey, if you don't have any bleomycin, the animals stay gray. As soon as you trigger, you get an Ashcroft score and Ashcroft score is a composite of histopath scoring.

The big challenge is the window here. So experiment by experiment, this will vary quite a bit. But in our hand and the way we run the model, most compounds never show activity honestly and only a few compounds will consistently show activity like twelve oh five and the reference compound. On the right you see a second model where we expose young mice to an X-ray in the lungs, grow them for a couple of weeks, randomize them and then we have an almost pure fibrotic process ongoing and we'll start to treat them as well. In this model we as well can measure lung function parameters.

I won't show them today, but they will come out over the coming months. So as well they are healthy disease, the positive control twelve oh five consistently on this and other parameters have shown good activity. As for twelve oh five, we had all of the preclinical data available. We had safety in patients for twelve weeks. We could immediately step into Phase II study.

That study is called the PITA study. It's larger than the FLORA in the sense that we take 60 patients. But here the difference with our previous IPF study is that we'll have patients on entelanib, quisphenidone and about one third on what we call local standard of care, which is in fact not any of the directed drugs against IPF. So FEC will be the primary endpoint. But as well here, we will include FRI to really take a deep dive into the lung function and that helps us as well understanding how good our autotaxin inhibitor in fact was working.

The PINTA study has a bit of a challenge that we don't want to interfere with the 1690 program, so that's why we are exploring it in different countries so that patients don't need to choose or sites don't need to choose between one of our two drugs. That's why we are here exploring countries where we've never been before, honestly. Let's now move to 03/1999. 3499 is again a novel mechanism of action where we believe we are the first to bring this to patients in the clinic. So with three thousand four hundred ninety nine, we play on the stiffness, the contraction of the fibroblasts in the lungs.

So what is known and known for a while, but also now we can measure this both in vitro and in vivo is that if you have a stiff tissue, that makes disease progressing fast. So part of the disease trigger is the disease itself, so you really can have if you grow the myofibroblast on a stiff matrix, they will convert quicker to a fibrotic tissue. What you see here is in fact is a culture of the myofibroblast and the darker the room is the better in picture, so I'm excusing myself a bit. But here you have one of the triggers that causes it and then from a light white circle you get a more intense white color which is the visual view of the myofibromas that contract. So you can really in the lab by just adding the compound, see that your drug is working on that aspect.

So there is an external reference there, but that is not developed at all. But our internal molecule really nicely and that's when showing the dose response from a nanomolar activity onwards inhibits the contraction of the myofibroblast in the lungs. So as well, while we said, wow, this is the first time that we really see a physiological effect on a cell type, we took this to the animal models. As well there, you see on the right side, on the left side, the bleomycin, strongest way of doing the model. It's waiting long enough until there's a fibrotic process only.

And

Speaker 8

out

Speaker 7

of a large family of compounds, effect 3,499 was the only one showing consistent activity. So even the bleomycin is a black box, only very good compounds really will give you a consistent activity. Also in the radiation model there, 34.99 shows consistent good activity on these and a number of other parameters. So I'm now going to give to Alip to show us the Phase three program Isabela.

Speaker 8

Thank you, Pete. It's a very exciting pipeline both in the inflammation space as well as fibrosis. So I'm just trying to move forward with the sake of time. So 1690, as you guys know, we've published last year results of the FLORA study in patients. Again, to remind you, this was a small study, 23 patients, randomized three:one placebo to drug.

What was striking for us was that the patients on drugs seemed to stabilize and not have any loss in FVC over a period of twelve weeks compared to placebo where it performed as you would expect in this patient population in terms of disease progression. What was also important for us is that the adverse event profile of the drug appeared to be quite benign with no difference between drug and placebo in that patient population, which is an important factor. As Pete said before, the current drugs that are approved and on the market right now are problematic enough that patients actually elect not to take medication despite the fact that there's very bad consequences to the natural progression of their disease. And in that same trial, when we used a more sensitive way to measure progression of the disease, this is a technique that employs high resolution CT scan and couples it with flow, computerized flow modeling. You see over time what you would expect to see if the disease is progressing, which is an increase in specific airway volume and a resulting reduction in the resistance.

And what we see with the orange bars with sixteen ninety is complete stabilization of this, and those were statistically significant. Again, this is a biomarker. This company is using a technology that's developing, so we don't have a robust way of interpreting it. But still, the fact that the FVC data, the FRI data are pointing in the same direction. What we've also seen in the paper is also the results home spirometry, which is done every day and averaged out, also show the same picture.

We have target engagement with LPA, inpatients and in healthy subjects, as well as some data from the quality of life, the St. George questionnaire, that trend in that direction. All of these made us feel quite confident about the results and quite excited. And perhaps as a testimony, again, of the importance of these data, the results of the study were published in The Lancet as well, so now three Lancets today for you in our presentation. More recently, we're excited about a development in this space.

So let me take a minute to kind of situate things here for you. So this is a cartoon from a paper by David Letter, who is one of our major collaborators on the 1690 program, where he walks through I'm not going to talk about all the other mechanisms of actions here, but particularly the one pertaining to us where you have lysophosphatidylcholine, which is essentially transformed into lysophosphatidic acid by ototoxin. LPA has been implicated in IPF. There are a number of trials looking at increase in the AL levels as well as in the tissues. And and LPA then goes and works through a number of receptors.

LPA there there are, I think, one through six, if I remember correctly. And LPA one, in particular, is blocked by this compound, by BMS, and and it is actually downstream from us. So an autotaxin inhibitor, where we have shown that we reduce LPA both in plasma and healthy subjects and in patients, you would expect the result would be a reduction in signaling through the LPA receptors, which is important. So a drug that works on the LPA1 and has been tested in this condition will be a good validation of our mechanism of action. And these are the data from the phase two study that they ran.

This a study that was randomized one to one to one placebo, six hundred milligram and six hundred milligram BID. And you can appreciate in the graph a dose dependent effect reducing the worsening or the progression of FVC and reaching statistical significance at the six hundred BID dose. So what I want to also mention is that this compound has toxic issues, which led to the premature discontinuation of the trial and also the drug. It has effects on the liver and also on the gallbladder. And I would presume that perhaps that precluded them from going to higher doses, which potentially could lead to better efficacy.

But to me, seeing a dose dependent effect here with a drug that works downstream from where we are is a very good validation independently of what we're doing and makes us feel much more confident about our Phase III program. And that's our Phase three program. So we've talked about it before. This is a again, treating the disease, as you know, it's a very serious disease, has prognosis worse than many cancers, the way we do studies in it will be very much like we do studies in cancer. So you cannot tinker with people's, you know, standard of care.

So you need to go on top of standard of care. This is very loud and clear to us by the FDA. And so we designed two identical studies. They will be run each one of them will be run-in The U. S, in Europe, and Latin America, and also some of the Asia Pacific regions.

Each study will have 750 patients that we call them Isabella one and Isabella two. Patients will be randomized one to one ratio to placebo and two doses of sixteen ninety that you see over here. The six hundred milligram was used in the FLORA study, that was the top dose that was used. And two hundred, based on our PKPD modeling and looking at LPA engagement, is at the bottom end of the curve, where we still have an effect, but not as robust as we see on the six weeks. The idea here that we will allow patients to stay on their randomized treatment until the last patient finishes fifty two weeks.

Primary endpoint is fifty two weeks change in FVC. However, the patients will remain on the randomized treatment until the last patient finishes, which means many patients will be treated much longer than this. We're anticipating recruitment duration would be about twenty four months, give or take. And as a result, we will have much more data that we will be able to compare to in a, again, randomized controlled manner. And that's very, very important for the agency, especially that we have two identical trials.

Analysis could be pooled and pre specified in discussions with health authorities where we pool analyses between the two trials to demonstrate effects on the more rare but clinically significant events such as death, such as hospitalization due to respiratory exacerbation such as reduction of MVC of more than 10%, and look at that. And that was something that I think is a bit unique for our program. The study is actively going right now. We have a number of sites in The US that have been activated, and the first dosing is imminent. I would have wished to tell you this today, but we're still waiting on our first patient to come in.

But we're very excited. There's a very good response from the patients, from the investigators, from the patient foundation as well. And we feel that we're way on our way to have a very good program going forward. And we'll be updating, of course, as

Speaker 3

this progresses.

Speaker 8

And with that, I'll turn over to Bart to conclude today's meeting.

Speaker 4

Thank you, Walid, and thank you, Pete, both for those very interesting presentations. I'll make some closing remarks before we get into a Q and A where I think we have about twenty minutes left for Q and A. I think there might be quite a few on your minds that you want to pose. But in terms of takeaways for today's meeting, I hope that you'll remember a couple of things. First of all, the pipeline that we're proposing here at Galapagos and the depth of that pipeline and the science behind that pipeline that we're very proud of, the platform that has now been proven in with multiple targets in patients ultimately.

Also the news flow that is coming up regarding especially filgotinib, but also the other compounds that we have in our pipeline is strong. And then finally, we're also moving towards commercial stage as we speak. We are a couple of years away from launching in Europe filgotinib. We're going to do that together with our partner Gilead, and we're going to build out our own commercial infrastructure also in those countries as the next step for Galapagos in terms of its growth. And that brings us to our motto then think big and that's what we're after with Galapagos.

So with those remarks, I'd like to conclude. And I'll hand the floor to Elizabeth for Q and A, and we'll take those questions between the three of us depending on the topics.

Speaker 1

Thank you very much, Bart. Operator, this is the moment to inform the callers again about how they can pose a question.

Speaker 0

Thank If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off We will now take our first question from Peter Welford from Jefferies. Please go ahead. Peter, your line is open.

Speaker 9

Hi, yes. Thanks for taking my question. I've got a couple, I think, for probably the range of different people. Firstly, just with regards to the allocation of resources. Obviously, a significant number of people were previously allocated to the cystic fibrosis programs internally.

Just wondering where those people and resources are now being allocated to and whether or not this could result in net savings, if you like, to the budget in 2019 or whether or not actually you're looking now to invest the potential savings for that in, if you like, in other projects and therefore actually capitalize on the savings that you could make? Secondly then, just financial one, I guess, the Bart, which disregards to the remaining upfront money from AbbVie. Should we assume that now is accelerated recognition in the fourth quarter given the collaboration is ended? And then finally, just with regards to a comment that I think I caught at the very start. Am I right in understanding that the tiered royalty on cystic fibrosis varies depending on the number of components and the identity of those components, not as typically assumed based on the level of commercial sales that are achieved?

Thank you.

Speaker 4

Peter, I'll briefly also repeat the questions in case some of the audience here also in New York have not fully understood them, but I'll take those three questions. First one was around allocation of resources, whether taking people outside of the CF program would result in savings. Peter, we are as a company, we're growing rapidly. And over the last year, we've increased our staff from about 600 people to 700 people throughout the various sites that we have in Europe. We have indeed a group of people that were active in CF, but we are going to be reallocating them to our other programs that we're starting.

The number of programs that are in Phase II and in Phase III is so strong that we have very quickly a place for this group of people. So do not expect major savings out of the stopping of CF program in the short term. Clearly, stopping CF in the mediumlong term takes away also the expenses that would have been associated with developing CF forwards. But for the short term in 2018, really the big impact is the receipt of the upfront payment of $45,000,000 That brings me then to your second question, how do we deal with that upfront? That is need expected to be received in cash in the fourth quarter.

In terms of recognition of this upfront, that's probably going to be largely in the fourth quarter, but there might be small overflow into Q1 because there are some transition activities still ongoing over the next couple of months. And we'll need to recognize both the remaining milestones that were still in our balance sheet as well as this particular upfront over the period of future involvement. But this is definitely something which is short term both in terms of accounting revenue and in cash as well. Then your last question was around the structure of the royalties. What I can say there is that these royalties are dependent on two variables: on one hand, sales levels, as was the case in the original agreement as well as on the number of components from that are currently developed that have been developed by the collaboration previously into a future triple combination that AbbVie would put into the markets.

And that ranges from zero components to two components of the triple. So royalties would obviously be lower when there's zero components existing being used in any future triple combination, and they would go up as more components of that have currently been developed will be part of that combination.

Speaker 9

Great. But sorry, if I could just quick follow-up on the 2,737. Is the fact that you have carved that out as a potential drug that you could develop yourself outside of CF, given the results we've seen from the FALCON study, where clearly that C2 corrector seems to have minimal, if any, effect. Does this affect the fact you think that that drug has a potential other mechanism or other activity that is is is perhaps was was misunderstood, if you like, in the first place, and therefore, there is utility for this drug in another indication? Or should we just read that some other way given that that drug has been specifically carved out and that seems to be the component that that failed, if you like?

Speaker 4

Yes. Let me just make sure that I've understood the question correctly, but because it's not the sound is not always great, Peter, but I apologize. So 2737 is indeed there is a carve out option outside yet for Galapagos with 2,737. Today, we're not ready to talk about the details of where we think this component this compound can actually be effective, but we have some scientific ideas that we want to explore with $27.37 outside CF. And in the case we would develop this further, some royalties will be due also from us to, to AbbVie.

Speaker 1

Yeah. We we can take a question here from the room now. Edwin Zhang?

Speaker 10

Yeah. It's Edwin Zhang from Stifel. Congrats on the very exciting quarter and all the progress. You delivered outstanding data on Finch 2, so people are paying more attention to the timeline of the potential registration. So your overall plan on this, Are we still expecting for year end of next year file for RA?

We know there's also a MANTA safety study ongoing. Are there any updates on that trial? So my second question on IPF. So what should we consider for successful trial in terms of the primary endpoint, FVC, in terms of trial design? Is this a non inferiority design?

Thank you.

Speaker 8

So I'll take both questions. So let's start with the filing and RA. I think Gilead later today will have their own Q3 results, and I think they might give more color to this. But I think they have already shared some information on this from the perspective that, as you can imagine, the in order to be able to file, you need a certain safety database for each dose. I don't if you guys are aware of this, but but the this is a chronic disease.

You're treating with also immunosuppressant agents, drugs that work very well, but still they are they are they're not trivial drugs. So the agency indicates that they want longer term data for each dose that you plan to file on. So it's not good enough to just finish the trial, you need to accumulate those data. We need to be pinch one and three to to to complete and also have the the the full data set to enable us to have a strong risk benefit assessment for each one. In addition, and that applies only for The US, not not for for Europe or Japan.

The reading from the FDA of some of the histologic findings that that have, you know, in some of the tox studies was that we would need to do clinical study in humans, a reproductive safety study, the MANTA study. And and that the the data from those studies will be needed from that study will be needed to be included in the overall package in in order to to support the adequate risk benefit assessment. So at this point, that's what we can say about it. As to the progress of this, look, the RA program went faster than anticipated. That puts a little bit more pressure on MANTA, I think.

But Gilead is very much engaged in in moving this forward. And so far, we've been very impressed with the way they've been operationally been able to execute on these studies. So that that's that's as much as I can say about it. But I think it's better to ask them also later on today in their in their results. Regarding the IPF, this is on top of standard of care.

So there's no it's not an non inferiority study. Right? So so what we expect is that we're gonna have a a number of patients reflecting The US population and and to some degree also the European population where we have about a third who are on entetanib, a third who are on parfanidone, and a third who are on neither of them. And the the primary endpoint is to show reduction in the FPC over time that is superior to placebo reflecting a slower rate of decline with our drug. What we're expecting also the aspirational is that we stabilize the disease if the data from our twelve week trial continues to hold for the remaining.

The other important piece which I alluded to that's very important to us, not the primary endpoint, but that would be an extremely important endpoint, is if we can demonstrate differences versus placebo on mortality, on hospitalization due to

Speaker 1

Operator, do we have a question on the line?

Speaker 0

Yes, certainly. We will now take our next question from James Quigley from JPMorgan. Please go ahead. Your line is now open.

Speaker 3

Hello. Thank you for taking my questions.

Speaker 11

A couple from me. So on Toledo, it looks like it's or the mechanism of action is blocking dendritic cells getting through to the epithelial cell barrier. Have you done any or any analysis in the mice as to whether so whether T cells can still get into the the brain? And I'm sort of thinking along the lines here around Tysabri and and and and PML risk. That's number one.

Number two is in IPS. I'd be interested to know how sixteen ninety stacked up in the bleomycin model and the radiation model versus lintatinib as three

Speaker 7

thousand four hundred ninety

Speaker 11

nine and twelve zero five look fairly similar. But obviously, we've seen the data from FLORA, which shows sixteen ninety could could have a disease effect. So just wondering how that shaped up there. And then finally, with filgotinib in 2, I may have missed this, but have you shown any data on the impact on pain alone? I'm just thinking more that GSK are positioning MOR103 as potentially having a strong impact on pain.

I just wondered how filgotinib or how patients responded on on pain, with with filgotinib specifically. Thank you.

Speaker 8

Who's gonna start? So this is Walid. I'll I'll start with your last questions on on FINCH two and pain. So all the additional analyses have not been fully communicated, and there's there's a limit what we can do. But I can and I realized I I was just at the ACR, and the focus on pain is is large.

The data that we have on pain are also very good. I just don't have the exact numbers that I can share with you, but those will be communicated as more data will be released on H2.

Speaker 7

First question, if I understood the question well, is there any risk that the compound penetrates into the brain as a consequence might have an increased risk for brain associated side effects? So we've gone through the toxin, that's not a lot of worry. Let's be clear. Honestly, with the chemistries we typically do, we hardly see any brain, drugs that penetrate well into the brain and that's the same up to now for what we've seen with this class of drugs. That is not any of our concerns at the moment.

And the

Speaker 8

second question? The sixteen ninety and results. So I I we we haven't shown the data because, again, we've shared it before, but the data with sixteen ninety and BLM are are equally robust to the ones I've seen. I don't know if you can add more color to it. Well, for sixteen ninety, we performed the various forms of the BLM, the prophylactic, the therapeutic both ways.

We did it. Sixteen nineteen performed very well. We also did the radiation model. If if that was a question also there, this is a good

Speaker 7

one that performs across all the different models.

Speaker 1

Just wanna add that we do have all of our preclinical work that we've published at conferences on 1690 on our website Yep. Clinical section, R and D.

Speaker 9

Now I've

Speaker 11

got a question in

Speaker 7

the room.

Speaker 1

Looks like Phil. Oh, thanks, James. Okay. We've got a question from Phil Nadeau.

Speaker 3

Hi. Phil Nadeau from Cowen. Two questions for me. First, on IPF. You mentioned in your prepared remarks that you could look at combination regimens.

Can you give us some sense when those combination trials could start and which of the candidates are likely to be used in them? And then second on CF, I'm I'm just curious to hear a little bit more about your thinking as to out licensing that program to AbbVie. Clearly, you don't need the cash, and it seems like a program you were pretty passionate about before. So I'm just I'm just wondering why why you let them take control. Let

Speaker 4

me start with your last question, Phil, on CF. And the question is why license back to AbbVie. Essentially, and I think Ono alluded to that in his introductory remarks, we announced in June that we felt that the collaboration was not productive. So we needed to find an approach that would either bring the molecules at AbbVie or at us. And we felt that strategically for us, given everything that we have ongoing in all those other programs in IPF, in with filgotinib, with OA that we are that we have enough on our plate to work on.

We think that the program will be in good hands at AbbVie. As Onno said, we are a company that's focusing on novel modes of action, first in class, and AbbVie will probably have an approach which is more geared towards a best in class approach. And that's what they will be doing with the CF program going forward. So we felt that all in all, the package of the situation at Galapagos, the economics of this transaction was very compelling to sign up the agreement as we did yesterday. We're very pleased with that outcome.

Speaker 7

So on IPF, don't know if it is the right question. I think you alluded to how and when do you plan to combine the different components we have in the pipeline. So combination of the 12 components, indeed, one of our big ambitions. We've been looking hard and in fact the dynamic range in the animal model is too limited. So that's not going to give us the answer and that's not going to probably give us a push to accelerate that.

So the plan there currently is first proof for each of them as a monotherapy and then over time, and that will then probably depend on how far we are with June as an as a drug on its own, combine them. But so we don't plan currently for the for the coming year or two any combination clinical studies, but it's it's a long term ambition because this disease really needs much better treatments. And as we don't understand it well, tackling it from different angles and bringing those together is is is the way forward. So that's clear.

Speaker 1

Okay. We'll take another question from the phone. Operator?

Speaker 0

Certainly. So the next call we'll take is from Wimal Kapadia from Bernstein. Please go ahead. Your line is now open.

Speaker 12

Great. Thanks very much for taking my question. Wimal Kapadia from Bernstein. Just a couple on filgotinib, please. So do you do you believe that FDA will view the retinal vein occlusion as a thrombo event?

And then tied to this, can you give us any color on what rate of thrombo events per one hundred patient years do you think will be the limit for FDA to consider a black box warning? I'm just trying to get a sense of how to think about the headline safety data when FINCH one and three are announced. Then I guess a similar question on herpes zoster. Is there a threshold event rate that FDA could consider enough to turn a front page warning into a black box warning? Thanks very much.

Speaker 8

K. Well, thank you for the question. So whether they will consider retinal vein occlusion a thrombotic event, I think that is a thrombotic event. Whether it's a deep venous thrombosis, it's not. And it's not pulmonary embolism.

I mean, I think it's it depends how you wanna look at it, but I think the the while the potential consequence of having retinal vein occlusion could be severe with with edema of the eye, potentially the loss of sight, it's not gonna kill you, unlike, for example, pulmonary embolism, which could be a result of the venous thrombosis. When you look at the data from Barry, they they divided things between arterial thrombosis and venous thrombosis, so the agency will look at these subclassifications and evaluate this. But even if you look at that, still the rate is very, very low. In terms of the patient year exposure, I'm not I don't have the patient year exposure data from FINCH two the others. What we have is what I showed you is the Darwin three where the rate is point one per 100 patient year currently, and it's spending very low.

Regarding Xoster, this is a well known class effect for the JAKs. If you some of you who who were at ACR or or follow this, you see this with all the JAKs. This is a known effect. And again, I think the data our data are looking very consistent where we're trending at the lower end of all the other JAKs that are out there. And again, we think it's because of our selectivity for JAK1.

Speaker 12

That's really helpful. Can I just follow-up? I guess it's more along the lines of, is that do you think there's a threshold for FDA to start to consider, you know, then starting to allocate these warnings on a per 100 patient years?

Speaker 8

I'm not aware of a of a specific threshold, to be honest. I, yeah, we we I'm I'm not aware of it. I haven't seen any communication from the FDA on that.

Speaker 12

Okay. Great. Thank you very much.

Speaker 1

Alright. Thank you. And I'm afraid that that's going to be the the end of our session today. I if have you a question, a burning question you'd like to pose, you can mail me at [email protected] or [email protected]. We can try to get your questions answered.

Thank you all, all the people who participated on the phone and the folks who came here to the Yale Club today. Our next planned financial results call is on February 2239, with publication of the results the night before. I imagine we'll speak with many of you before then. So thank you again, and goodbye.